By Maximilian Clarke

An agreement on Greece’s economic and financial policies has been reached between the European Commission, the European Central Bank and the International Monetary Fund following the institutions’ fifth review mission to the embattled republic, the IMF has said.

The groups found that the recession will deepen by more than anticipated though exports are showing signs of improving. They also praised Greece’s deficit reduction, though conceded that their initial targets are no longer within reach- largely due to the country’s declining GDP.

Greece has made some progress in implementing state privatisations via a single, independently managed privatisation fund. Worsening market conditions will, however, significantly erode asset value, deterring investors and further complicating the privatisation process. Added to this is mounting political pressure from frequent, violent clashed from a public averse to the privatisation of their assets.

Banks have made progress in strengthening their capital base, whilst weaker banks will be wound down as a result of the new banking-law; whilst structural reforms continued to make slow, uneven progress. This is a major limiting factor in Greece’s recovery.

Overall, the IMF report concluded, the authorities continue to make important progress, notably with regard to fiscal consolidation. To ensure a further reduction in the deficit in a socially acceptable manner and to set the stage for a recovery to take hold, it is essential that the authorities put more emphasis on structural reforms in the public sector and the economy more broadly.